The Welfare Analysis of a Free Trade Zone: Intermediate Goods and the Asian Tigers

MAS Staff Paper

Posted: 10 Jan 2006

See all articles by Andrew Feltenstein

Andrew Feltenstein

Georgia State University - Department of Economics

Florenz Plassmann

SUNY at Binghamton, Department of Economics

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Date Written: December 2005

Abstract

We analyse trade reform among the ASEAN countries, which recently began removing all mutual trade barriers. The standard method to avoid complete specialization in traded goods is to distinguish goods both by physical type and place of origin (the so called Armington assumption). This methodology is not suitable for the sort of intermediate goods produced by the ASEAN countries. We develop a computational approach in the context of a non-Armington dynamic general equilibrium model. Analyzing the results of a calibrated version of the model, we find that trade liberalization is generally welfare improving for the ASEAN countries.

Keywords: Non-Armington, Trade Reform, ASEAN

JEL Classification: D58, F13

Suggested Citation

Feltenstein, Andrew and Plassmann, Florenz, The Welfare Analysis of a Free Trade Zone: Intermediate Goods and the Asian Tigers (December 2005). MAS Staff Paper. Available at SSRN: https://ssrn.com/abstract=874091

Andrew Feltenstein (Contact Author)

Georgia State University - Department of Economics ( email )

P.O. Box 3992
Atlanta, GA 30302-3992
United States
404-4130093 (Phone)

Florenz Plassmann

SUNY at Binghamton, Department of Economics ( email )

Binghamton, NY 13902-6000
United States
607-777-4304 (Phone)

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